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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------------
AMENDMENT
to
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED
PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO
FILED PURSUANT TO RULE 13-2(a)
THE SANDS REGENT
----------------
(Name of Issuer)
Common Stock, Par Value $0.05 Per Share
---------------------------------------
(Title of Class of Securities)
800091100
--------------
(CUSIP Number)
Ferenc B. Szony
The Sands Regent
345 North Arlington, Ave.
Reno, Nevada 89501
(775) 348-2200
----------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
May 19, 1999
-------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is subject of this Schedule 13D, and is filing this
statement because of Rule 13d-1(b)(3) or (4), check the following box: [ ]
Page 1 of 7 Pages
Exhibit Index is on Page 7
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SCHEDULE 13D
CUSIP NO. 800091100 PAGE 2 OF 7 PAGES
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
SOCIAL SECURITY NO. OF ABOVE PERSON
PETE CLADIANOS, JR.
SSN: ###-##-####
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
Not Applicable
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
Not Applicable
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) OR 2(e)
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEVADA
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
*
Number of --------------------------------------------------------------
Stock 8 SHARED VOTING POWER
Beneficially *
Owned By
Each --------------------------------------------------------------
Reporting 9 SOLE DISPOSITIVE POWER
Person *
- --------------------------------------------------------------------------------
With 10 SHARED DISPOSITIVE POWER
*
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,058,175
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
Not Applicable
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.5%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
2
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* 386,286 shares (8.6%) of The Sands Regent common stock are owned by trusts
for the benefit of Pete Cladianos, III, his son. 375,500 shares (8.3%) of
The Sands Regent common stock are owned by trusts for the benefit of
Antonia Cladianos, II, his daughter. 254,596 shares (5.6%) of The Sands
Regent common stock are owned by trusts for the benefit Leslie Cladianos,
his daughter. 23,565 shares (0.5%) of The Sands Regent common stock are
owned by a trust for the benefit of Allison Cladianos, his granddaughter.
18,228 shares (0.4%) of The Sands Regent common stock are owned by a trust
for the benefit of Hannah Patricia Pauly. Pete Cladianos, Jr., is the sole
trustee of each of the trusts listed above (the "Trusts") and possesses
full investment authority. See Item 5 for further information on the
computation of percentages set forth herein.
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This Amendment to Schedule 13D amends the Schedule 13D dated July 16,
1997, (the "Schedule 13D"). Unless otherwise indicated, all capitalized terms
used herein shall have the same meaning as provided in the Schedule 13D.
Item 1. Security and Issuer
Item 1 is hereby amended and restated in its entirety as follows:
"This statement relates to the common stock, par value $.05 per
share, of The Sands Regent (the "Company"), whose principal executive
offices are located at 345 North Arlington Avenue, Reno, Nevada 89501."
Item 4. Purpose of Transaction.
Item 4 is hereby amended and restated in its entirety as follows:
"On May 19, 1999, pursuant to a stock purchase agreement (the
"Stock Purchase Agreement") with Sapphire Gaming, LLC, a Nevada
limited-liability company ("Sapphire"), the Reporting Person and the
Trusts agreed to sell all of the 1,058,175 common shares beneficially
owned by them to Sapphire. Information in Item 6 concerning the Stock
Purchase Agreement is incorporated herein by reference. The Stock
Purchase Agreement is filed as an exhibit pursuant to Item 7."
Item 5. Interest in the Securities of the Issuer.
Item 5 is hereby amended and restated in its entirety as follows:
"As of the close of business on May 19, 1999, there were issued
and outstanding 4,498,722 shares of common stock of the Company. As of
May 19, 1999, the Trusts owned 1,058,175 of such shares, or 23.5% of
those outstanding. Pete Cladianos, Jr. has the sole power to vote and
dispose of the 1,058,175 common shares. Pete Cladianos, Jr. does not
have any shared power to vote, direct the vote, dispose or direct the
disposition of any other common shares."
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Company.
Item 6 is hereby amended and restated in its entirety as follows:
"The following discussion of certain terms of the Stock Purchase
Agreement does not purport to be complete and is qualified in its
entirety by reference to the complete text of the Stock Purchase
Agreement, a copy of which is attached hereto as Exhibit 99.1.
Pursuant to the terms of the Stock Purchase Agreement, the
Reporting Person, the Trusts and certain other shareholders of the
Issuer (collectively, the "Selling Stockholders") shall sell to
Sapphire, and Sapphire shall purchase from the Selling Stockholders, all
of the outstanding common stock of Issuer beneficially owned by the
Selling Stockholders for an aggregate purchase price of $6,000,000.00
(the "Transaction").
As set forth in the Stock Purchase Agreement, consummation of
the Transaction is subject to the satisfaction of certain conditions,
including but not limited to, (a) the approval of the Transaction by:
(i) Wells Fargo Bank, (ii) the Nevada Gaming Commission, and (iii) any
other casino regulatory authority with jurisdiction over the
Transaction, and (b) the rescheduling or refinancing of a loan with
Wells Fargo Bank or another lender. The Stock Purchase Agreement may be
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terminated and the Transaction may be abandoned at any time prior to
the Closing Date (as defined in the Stock Purchase Agreement), if,
among other reasons set forth in the Stock Purchase Agreement, (i) the
requisite approvals are not obtained, or (ii) the Selling Stockholders
and Sapphire mutually agree to terminate the Stock Purchase Agreement."
Item 7. Material to be Filed as Exhibits.
Item 7 is hereby amended by inserting the following:
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<C> <S>
99.1 Stock Purchase Agreement, dated May 19, 1999 between Sapphire
Gaming LLC and Peter Cladianos, Jr., Katherene Johnson Latham,
Deborah R. Lundgren and the Trustees of the Trusts listed on
Exhibit A attached thereto and incorporated therein by reference.
</TABLE>
5
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SIGNATURES
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certifies that the information set forth in this
statement is true, complete and correct. Date: May 21, 1999
By: /s/ PETE CLADIANOS, JR.
-----------------------------------
Pete Cladianos, Jr., in his
capacity as trustee of the Pete
Cladianos, Jr., Living Trust, dated
May 25, 1989; trustee of a trust
for the benefit of Bradley
Cladianos; trustee of trusts for
the benefit of Pete Cladianos, III;
trustee of trusts for the benefit
of Antonia Cladianos II; trustee of
trusts for the benefit of Allison
Cladianos; trustee of trusts for
the benefit of Leslie Cladianos.
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EXHIBIT INDEX
The Exhibit Index is hereby amended to insert the following
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<C> <S>
99.1 Stock Purchase Agreement, dated May 19, 1999 between Sapphire
Gaming LLC and Peter Cladianos, Jr., Katherene Johnson Latham,
Deborah R. Lundgren and the Trustees of the Trusts listed on
Exhibit A attached thereto and incorporated therein by reference.
</TABLE>
7
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EXHIBIT 99.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (Agreement) dated this _________ day of
May, 1999, is entered into by and between Sapphire Gaming LLC, a California
limited liability company (Buyer), and PETE CLADIANOS, JR., KATHERENE JOHNSON
LATHAM, DEBORAH R. LUNDGREN and the Trustees of the Trusts listed on Exhibit A,
attached hereto and incorporated herein by reference (collectively, Sellers).
RECITALS
THIS AGREEMENT IS MADE AND ENTERED INTO WITH REFERENCE TO THE FOLLOWING
FACTS:
A. Sellers own, free and clear of all adverse claims, Two Million
Eighty-Six Thousand Twenty-Two (2,086,022) issued and outstanding shares of
capital stock of THE SANDS REGENT, a Nevada corporation (Company), as set forth
on Exhibit A, attached hereto and incorporated herein by reference (Shares); and
B. Sellers desire to sell and Buyer desires to purchase the Shares for
the consideration and upon the terms and subject to the conditions hereinafter
set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements hereinafter set forth and other good and valuable consideration, the
parties agree as follows:
1. Purchase and Sale of Stock.
1.1. Agreement to Purchase and Sell. Upon the terms and subject to the
conditions set forth in this Agreement and upon the representations and
warranties made by each of the parties on the Closing Date, Sellers shall sell,
grant, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase
and acquire from Sellers, all of the Shares, whether owned by Sellers,
individually or as Trustees.
1.2. Purchase Price. The purchase price of the Shares shall be Six
Million Dollars ($6,000,000.00).
1.3. Deposit.
1.3.1. Buyer shall deposit the sum of One Million Dollars as an
earnest money deposit as follows: (i) the sum of Three Hundred Thousand Dollars
($300,000.00) (Initial Security Deposit) upon the execution of this Agreement
and (ii) the sum of Six Hundred and Seventy Five Thousand Dollars, or an
irrevocable letter of credit in a like amount, at Buyer's election, subject to
the terms set forth below, within thirty days of execution of this Agreement.
All funds shall be deposited by wire transfer to Western Title Company.
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1.3.2. The Initial Security Deposit shall be a nonrefundable
deposit to be retained by Sellers in the event the Buyer fails or is unable to
consummate this transaction for any reason whatsoever, save and except for the
failure of Buyer to obtain the irrevocable letter of credit as further provided
in this paragraph. If the transaction closes then the Initial Security Deposit
shall be applied to the purchase price. In the event that the Buyer is unable to
obtain an irrevocable letter of credit in compliance with the terms set forth
hereinafter within thirty (30) days of the execution of this Agreement Sellers
shall have the right to cancel this Agreement and retain One Hundred Thousand
Dollars ($100,000.00) of the Initial Deposit and release the balance to the
Buyer.
1.3.3. The amount of Twenty Five Thousand Dollars ($25,000.00)
(Legal Fee Deposit) shall be paid into escrow upon execution of this Agreement.
This deposit shall be nonrefundable. The purpose of this deposit shall be to pay
for all legal costs and legal fees incurred by Sellers related to this
transaction. In the event this transaction does not close, for any reason,
Sellers shall refund to Buyer any funds not expended in researching and
documenting this transaction. In the event this transaction closes then Sellers
shall retain the Twenty-Five Thousand Dollars ($25,000.00) and shall apply the
same to the purchase price.
1.3.4. The amount of Six Hundred and Seventy Five Thousand
Dollars ($675,000.00) (Final Deposit) shall be deposited in escrow within thirty
days of the execution of this Agreement. The Final Deposit shall be either in
cash wired to Western Title or in the form of an irrevocable letter of credit
drawn on a bank approved in advance by Sellers, at Buyer's election. Sellers
shall not unreasonably withhold approval of Buyer's bank. The irrevocable letter
of credit shall run for a period of twenty-four (24) months and shall be payable
through escrow upon certification to the bank that either all of the terms and
conditions of the escrow have been complied with or that Buyer has been
otherwise unable to perform under the terms of this Agreement. For the purposes
of this Final Deposit, in the event Buyer is unable to obtain Nevada Gaming
Commission approval of the transfer of the Shares then the irrevocable letter of
credit shall be released or any cash Deposit shall be refunded, as the case may
be. Refusal to submit the required applications to the Nevada Gaming Control
Board or voluntary withdrawal of the Application shall not constitute a failure
to obtain Nevada Gaming Commission approval. In the event of such failure to
file or the voluntary withdrawal of the application shall constitute a default
and Sellers shall be entitled to draw on the irrevocable letter of credit.
1.3.5. The Initial Deposit and the Legal Fee Deposit shall bear
interest that shall accrue to the Sellers. The interest shall not be applied to
the Purchase Price.
1.3.6. If the Buyer is unable to or does not obtain Nevada Gaming
Commission approval of its license application, Sellers shall transfer to Buyer
one hundred thousand (100,000) shares of the Sands common stock upon the release
from escrow of the Initial Deposit and the Legal Fee Deposit. The Legal Fee
deposit shall be used for payment of legal fees and costs incurred in this
transaction, as set forth above, and the balance shall be refunded to Buyer.
1.3.7. Buyer shall have ninety (90) days from the date hereof to
obtain a letter from Wells Fargo Bank authorizing the transfer of the Shares and
the refinancing of the existing loan, or a commitment letter from a new lender
to replace the existing Wells Fargo Bank loan in
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the amount of Ten Million Eight Hundred Thousand Dollars ($10,800,000.00), at
Buyer's election, provided, however, that the period to obtain a new loan shall
be one hundred fifty (150) days if the new loan is a Commercial Mortgage Backed
Securities Loan; provided that nothing shall prevent the Company that owns the
hotel/casino from locating and placing into effect a new loan of its own. The
permissible terms of a new loan to be obtained by the Buyer shall be a minimum
five (5) year term, a maximum of ten percent (10%) per annum interest, and a
maximum one percent (1%) origination fee. If the loan or authorization
contemplated under this paragraph is not obtained within such ninety (90) day
period either party shall have the right to terminate this Agreement. In the
event Buyer is unable to obtain the Wells Fargo Bank authorization and Sellers
or Buyer are unable to obtain a new loan, Buyer shall forfeit One Hundred
Thousand Dollars ($100,000.00) of the Initial Deposit and Escrow Agent shall
immediately release the same to Sellers. In such event, the Final Deposit shall
be released. Sellers agree that upon execution of this Agreement they shall
request Wells Fargo Bank to restructure the loan to permit Buyer to assume the
same.
1.4. Payment of Purchase Price. The balance of the Purchase Price, Five
Million Dollars ($5,000,000.00), shall be payable on the Closing Date by wire
transfer of immediately available funds to Western Title in such bank accounts
designated by Escrow Agent pursuant to the Escrow Agreement. The Deposit shall
be credited against the Purchase Price on the Closing Date.
1.5. Closing. The Closing shall take place within thirty (30) days from
the date of approval of this transfer by the Nevada Gaming Commission. (Closing
Date).
1.6. Due Diligence. Buyer shall require no due diligence period.
1.7. Gaming License Application. Buyer shall apply to the Nevada Gaming
Control Board for its gaming license within thirty (30) days of execution of
this Agreement. Failure to submit a complete application for licensure within
this period shall constitute a material breach of this Agreement and Sellers
shall be entitled to retain the Initial Deposit.
2. Representations and Warranties of Sellers.
For the purpose of inducing Buyer to enter into this Agreement and to
purchase the Shares, Sellers severally represent and warrant to Buyer as
follows:
2.1. Existence; Good Standing; Corporate Authority; Compliance With
Law. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Nevada. The Company is duly
qualified to transact business as a foreign corporation under the laws of all
states in which the Company currently transacts business and which requires such
qualification. The Company is not in default with respect to any order of any
court, arbitration board or tribunal to which the Company is a party.
2.2. Ownership of Shares. Sellers own the Shares, in such amounts as
set forth on Exhibit A, free and clear of all security interest, liens,
encumbrances, options, claims or rights of others and defects in title and
Sellers have not sold, granted, hypothecated, pledged, gifted, or in
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any manner, voluntarily or involuntarily, transferred (individually, a Transfer)
all or any part of the Shares, except to Buyer pursuant to this Agreement. Each
of the Shares has been fully paid for and is non-assessable and was validly
issued. Each of the parties constituting Sellers who is an individual owns
his/her portion of the Shares as his/her sole and separate property, and his/her
spouse, if any, has no community property interest in and to said Shares.
2.3. Validity and Effect of Agreements. This Agreement constitutes, and
all agreements and documents contemplated hereby when executed and delivered
pursuant hereto for value received will constitute, the valid and legally
binding obligations of Sellers enforceable in accordance with their terms,
except that enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or other similar laws of general
application now or hereafter in effect relating to the enforcement of creditors'
rights generally and except that the remedies of specific performance,
injunction and other forms of equitable relief are subject to certain tests of
equity jurisdiction, equitable defenses and the discretion of the court before
which any proceeding therefor may be brought. To the best of Sellers' knowledge,
the execution and delivery of this Agreement does not and the consummation of
the transactions contemplated hereby will not (i) require the consent of any
third party (except as set forth in Paragraphs 6.1.3 and 6.1.4 of this
Agreement), (ii) result in the breach of any term or provision of, or constitute
a default under, or result in the acceleration of or entitle any party to
accelerate (whether after the giving of notice or the lapse of time or both) any
obligation under, or result in the creation or imposition of any lien, charge,
pledge, security interest or other encumbrance upon any part of the property of
the Company pursuant to any provision of any order, judgment, arbitration award,
injunction, decree, indenture, mortgage, lease, license, lien, or other
agreement or instrument to which Sellers or the Company is a party or by which
any of them is bound. This Agreement and the compliance with the terms hereof
will not violate, to the best of Sellers' knowledge, the Company's articles of
incorporation, bylaws, any indenture or contract to which the Company is a party
or by which it is bound, or any statute, rule, regulation or order of any court
or agency applicable to the Company or Sellers.
2.4. Trusts. With respect to any person executing this Agreement as a
trustee (individually, a Trustee) of any trust (individually, a Trust) who is
one of the parties constituting Sellers: (i) each Trust has been duly
established pursuant to a trust instrument (individually, a Trust Instrument)
which is in full force and effect as of the date hereof; (ii) each Trustee has
been duly appointed and has the power to bind the Trust under this Agreement
pursuant to the terms of the respective Trust Agreement, and this Agreement is
valid and binding upon each Trustee in his/her capacity as trustee of the
respective Trust; (iii) the execution and delivery of this Agreement by each
Trustee and the consummation of the transactions contemplated hereby will not
result in the breach of any term or provision of the respective Trust
Instrument; and (iv) as of the Closing, either: (A) all such Trust Instruments
shall be in full force and effect without revocation or modification or
amendment in any manner that would delay, restrict, or prohibit the transfer of
the Shares owned by the respective Trust as of the date of this Agreement to
Buyer in accordance with and pursuant to the terms of this Agreement, or (B) if
any Trust Instrument is revoked, modified or amended after the date of this
Agreement, the terms and provisions of this Agreement shall apply to and be
binding upon any party then legally entitled to the beneficial ownership of the
Shares owned as of the date of this Agreement by the respective Trust.
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2.5. Affiliated Entities. Company has no subsidiaries other than Zante,
Inc., a Nevada corporation (Affiliated Entity).
2.6. Capitalization. The authorized capital stock of the Company
consists of Twenty Million (20,000,000) shares of 05/100th Dollar ($0.05) par
value common stock (Stock), all of one class, of which there are outstanding on
the date hereof Four Million, Four Hundred Ninety Eight Thousand, Seven Hundred
Twenty Two (4,498,722) shares and One Hundred Eight Thousand (108,000) shares
are reserved for granted and unexercised options pursuant to a stock option plan
dated the 18th day of January, 1985 as amended (Stock Option Plan) for key
employees.
2.7. Jurisdictions. The Company or an Affiliated Entity is duly
licensed to conduct gaming operations at its facilities in Reno, Nevada.
2.8. Securities Filings. Sellers and, to Sellers' best knowledge, the
Company have timely made all filings, disclosures, statements, and reports
required to be filed or given to the Securities and Exchange Commission and/or
to NASDAQ with respect to the Shares and/or the Company as of the date of this
Agreement and at any time during the two (2) year period prior to the date of
this Agreement. Such documents complied in all material respects with the
respective requirements of the SEC and NASDAQ.
2.9. Litigation. Except as set forth on Schedule 2.9, there are no
actions, suits or proceedings pending nor, to Sellers' knowledge, threatened
before any court, agency or other body which involves the Company wherein the
Company, Sellers or its Affiliates are defendants as of the date of this
Agreement, which are not otherwise covered by insurance or third parties.
2.10. No Brokers. Sellers have not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of Buyer or the Company to pay any finder's fees, brokerage or
agent's commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby, and Sellers are not aware of any claim or basis for any claim for
payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
2.11. No Misrepresentation or Omission. No representation or warranty
by Sellers in this Article 2 contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained therein not misleading or will omit to state a material
fact necessary in order to provide Buyer with accurate information as to the
Company and the Shares.
3. Representations and Warranties of Buyer.
For the purpose of inducing Sellers to enter into this Agreement and to
sell the Shares, Buyer represents and warrants to Sellers as follows:
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3.1. Existence; Good Standing; Corporate Authority; Compliance With
Law. Buyer is a limited liability company duly organized, validly existing and
in good standing under the laws of the State of Nevada, its jurisdiction of
formation. Buyer is duly qualified to transact business as a foreign limited
liability company under the laws of all States in which the Buyer currently
transacts business and which requires such qualification. Buyer is not in
default with respect to any order of any court, arbitration board or tribunal to
which Buyer is a party.
3.2. Validity and Effect of Agreements. This Agreement constitutes, and
all agreements and documents contemplated hereby when executed and delivered
pursuant hereto for value received will constitute, the valid and legally
binding obligations of Buyer enforceable in accordance with their terms, except
that enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or other similar laws of general
application now or hereafter in effect relating to the enforcement of creditors'
rights generally and except that the remedies of specific performance,
injunction and other forms of equitable relief are subject to certain tests of
equity jurisdiction, equitable defenses and the discretion of the court before
which any proceeding therefor may be brought. To the best of Buyer's knowledge,
the execution and delivery of this Agreement does not and the consummation of
the transactions contemplated hereby will not (i) require the consent of any
third party (except as set forth in Paragraphs 6.1.3 and 6.1.4), (ii) result in
the breach of any term or provision of, or constitute a default under, or result
in the acceleration of or entitle any party to accelerate (whether after the
giving of notice or the lapse of time or both) any obligation under, or result
in the creation or imposition of any lien, charge, pledge, security interest or
other encumbrance upon any part of the property of the Company pursuant to any
provision of, any order, judgment, arbitration award, injunction, decree,
indenture, mortgage, lease, license, lien, or other agreement or instrument to
which Buyer is a party or by which it is bound.
3.3. Buyer's Experience. Buyer and its officers have such knowledge and
experience in financial and business matters that it and they are capable of
evaluating the merits and risks of their investment in the Shares and that Buyer
and its officers have the financial ability to purchase the Shares without
securing any purchase money financing with the assets of the Company. Nothing
contained in the preceding sentence is intended to nor shall be deemed to limit
in any manner Buyer's ability or right to secure any purchase money financing
desired by Buyer with the Shares upon the consummation of the purchase of the
Shares by Buyer.
3.4. Investment Purposes. Buyer will acquire the Shares for investment
purposes only and without any present intention of distributing or otherwise
reselling any of them.
3.5. Restricted Securities. Buyer understands that the Shares will be
"restricted securities" as that term is defined in the Rules and Regulations of
the Securities and Exchange Commission under the 1933 Act (Act) and accordingly
may not be re-offered or resold by Buyer unless they are registered under the
Act or unless an exemption from such registration is available, and Buyer
consents that any certificates for the Shares may be legended accordingly.
3.6. No Brokers. Buyer has not entered into any contract, arrangement
or understanding with any person or firm which may result in the obligation of
Sellers or the Company to pay any finder's fees, brokerage or agent's
commissions or other like payments in
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connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby, and Buyer is not aware of any claim or
basis for any claim for payment of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.
3.7. No Misrepresentation or Omission. No representation or warranty by
Buyer in this Article 3 contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained therein not misleading or will omit to state a material
fact necessary in order to provide Sellers with accurate information as to
Buyer.
4. Covenants of Sellers.
4.1. Full Cooperation. From the date of this Agreement and until the
Closing Date, Sellers shall fully cooperate with Buyer and shall cause the
Company to fully cooperate with Buyer in connection with: (i) any reasonable
request by Buyer for information (including, without limitation, the books and
records of the Company subject to Buyer's review); (ii) Buyer's, Sellers' and
the Company's obtaining any consent, approval, order of, or authorization
required by any regulatory agency (including, without limitation, the Securities
and Exchange Commission, NASDAQ, and any state gaming authority), Wells Fargo
Bank or any other lender, or any other third party or governmental agency or
entity required to be obtained by Buyer, Sellers, or the Company in connection
with the purchase and sale of the Shares as contemplated in this Agreement;
(iii) Buyer's physical access to inspect any real property or personal property
owned by the Company; and (iv) any other activities of Buyer related to the
purchase and sale of the Shares as contemplated under this Agreement or the
Escrow Agreement. Subject to all confidentiality requirements set forth in this
Agreement, Sellers shall cause the Company to make photocopies, at the Buyer's
expense, and to promptly deliver the same to Buyer, of any and all documents in
the Company's files reasonably related, in Buyer's judgment, to the purchase and
sale of the Shares or the business affairs of the Company.
4.2. Transfer of Shares. Sellers shall not (i) Transfer all or any part
of the Shares after the date of this Agreement except for the consummation of
the sale of the Shares to Buyer in accordance with the terms of this Agreement;
(ii) offer to Transfer all or any part of the Shares to any third party, solicit
any such offer, negotiate the Transfer of all or any part of the Shares to any
third party, accept an offer to Transfer all or any part of the Shares to any
third party, or otherwise contract with any third party for the Transfer of all
or any part of the Shares, or (iii) give a proxy to vote their Shares to any
third party except to another of the parties constituting Sellers who is a party
to this Agreement and who shall be bound by this Agreement with respect to any
such proxy.
4.3. Corporate Transactions. From the date of this Agreement and until
the Closing Date, unless Sellers are advised by a written opinion of Nevada
legal counsel (with a copy of such opinion delivered to Buyer) that the same
would be a breach of a fiduciary duty to the Company or its other shareholders,
each of the parties constituting Sellers who is a director or officer of the
Company and each of the parties constituting Sellers as a shareholder of the
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<PAGE> 8
Company, shall use his/her best efforts to cause the Company not to: (i) issue
any more of the authorized and unissued capital stock of the Company, except
pursuant to the Stock Option Plan; (ii) authorize any additional capital stock
of the Company or any other class of stock of the Company other than the
presently authorized common stock of the Company; (iii) grant or issue any
warrant, option, or other right to purchase shares of any outstanding capital
stock of the Company; (v) enter into any contract to merge or consolidate with
or sell all or any substantial part of its assets to any other corporation or
person; or (iv) amend its articles of incorporation or bylaws.
4.4. Company Business. From the date of this Agreement and until the
Closing Date, unless Sellers are advised by a written opinion of Nevada legal
counsel (with a copy of such opinion delivered to Buyer) that the same would be
a breach of a fiduciary duty to the Company or its other shareholders, each of
the parties constituting Sellers who is a director or officer of the Company,
and each of the parties constituting Sellers as a shareholder of the Company,
shall use his/her best efforts to cause the Company to: (i) conduct its business
in the ordinary, normal and customary course and manner; (ii) conduct its
business with good business practices and in compliance with all applicable
state, federal and local laws; (iii) maintain its real property improvements in
as good a condition as said properties are presently in, normal wear and tear
excepted; (iv) maintain its corporate existence in good standing; (v) keep
proper business and accounting records; (vi) continue in all respects presently
existing insurance coverage; (vii) preserve its business and organization
intact, to keep the services of its principal employees and to preserve its good
will; and (viii) not change its auditors, attorneys, or other major consultants.
4.5. Regulatory Activities. Sellers shall themselves, and/or shall
cause the Company to timely notify and/or file any and all required documents or
instruments with the Securities and Exchange Commission, NASDAQ, the gaming
regulatory agencies and authorities in the State of Nevada with jurisdiction
over the Company, and any other governmental agency or entity with jurisdiction
over the purchase and sale of the Shares as contemplated under this Agreement if
any such notice and/or filings is/are required to be given and/or filed by
Sellers and/or the Company in connection with the purchase and sale of the
Shares contemplated under this Agreement; and Sellers shall use their best
efforts to obtain, or cause the Company to obtain, as the case may be, before
Closing, any consent, approval, order of, or authorization required by any such
agency and any other third party or governmental agencies required to be
obtained by Sellers and/or the Company in connection with said purchase and sale
transaction.
4.6. Consummation of Transaction. Provided that Buyer is not in Default
under this Agreement or the Escrow Agreement or any Default is cured within a
reasonable period of time following written notice thereof from Sellers, Sellers
shall not do anything at any time after the date of this Agreement inconsistent
with the Consummation of the purchase and sale of the Shares as contemplated in
this Agreement. Sellers shall at all times use their best efforts to cause the
purchase and sale of the Shares to be consummated in accordance with the terms
of this Agreement.
4.7. Certificates. Prior to Closing Sellers shall deliver to Escrow
Agent certificates and other instruments representing the Shares, duly endorsed
for transfer or accompanied by
8
<PAGE> 9
appropriate stock powers (in either case executed in blank or in favor of Buyer
with the execution thereof guaranteed by a licensed brokerage firm or bank),
together with all other documents necessary or appropriate to validly transfer
the Shares to Buyer free and clear of all security interests, liens,
encumbrances, options, claims or rights of others, and defects in title.
4.8. Escrow Agreement, Transfer of Shares. On or before Closing Sellers
shall execute and deliver the Escrow Agreement to Buyer and the Escrow Agent
concurrently with their execution and delivery of this Agreement to Buyer. Upon
Closing Sellers shall cause the Company to transfer the Shares upon the books of
the Company to Buyer and/or to reissue a stock certificate or certificates to
Buyer in the amount of the Shares.
5. Other Covenants and Agreements.
5.1. Indemnification by Sellers. Upon the terms and subject to the
conditions set forth in Section 5.3 hereof and this Section 5.1, each of the
parties constituting Sellers agrees severally to indemnify and hold Buyer
harmless against, and will reimburse Buyer on demand for any payment, loss,
cost, damage, liability or expense (including reasonable attorney's fees and
reasonable costs of investigation incurred in defending against such payment,
loss, cost: damage, liability or expense or claim therefor made or incurred by
Buyer at any time, or asserted against Buyer by Sellers or any third party at
any time after the Closing Date in respect of any omission, misrepresentation,
breach of warranty or Default on the part of each of the Parties constituting
Sellers under any term, provision, covenant or agreement contained in this
Agreement.
5.2. Indemnification by Buyer. Upon the terms and subject to the
conditions set forth in Section 5.3 hereof and this Section 5.2, Buyer agrees to
indemnify and hold Sellers harmless against, and will reimburse Sellers on
demand for, any payment, loss, cost, damage, liability or expense (including
reasonable attorney's fees and reasonable costs of investigation incurred in
defending against such payment, loss, cost, damage, liability or expense or
claim therefor) made or incurred by Sellers at any time, or asserted against
Sellers by Buyer or any third party at any time after the Closing Date in
respect of any omission, misrepresentation, breach of warranty, or Default under
any term, provision, covenant or agreement on the part of Buyer contained in
this Agreement.
5.3. Conditions of Indemnification. With respect to any actual or
potential claim, any written demand, the commencement of any action or the
occurrence of any other event which involves any matter or related series of
matters (a Claim) against which a party hereto is indemnified (Indemnified
Party) by the other party (Indemnifying Party) under Section 5.1 or 5.2:
5.3.1. Promptly after the Indemnified Party first receives
written documents pertaining to the Claim, or if such Claim does not involve a
third party Claim (Third Party Claim), promptly after the Indemnified Party
first has actual knowledge of such Claim, the Indemnified Party shall give
notice to the Indemnifying Party of such Claim in reasonable detail and stating
the amount involved, if known, together with copies of any such written
documents.
9
<PAGE> 10
5.3.2. The Indemnifying Party shall have no obligation to
indemnify the Indemnified Party with respect to any Claim if (i) the Indemnified
Party fails to give the notice with respect thereto in accordance with Paragraph
5.3.1 hereof and the Indemnifying Party is prejudiced as a result of such
failure, or (ii) the notice with respect thereto is not given on or before the
third anniversary of the Closing Date.
5.3.3. If the Claim involves a Third Party Claim, then the
Indemnifying Party shall have the right, at its cost, expense and ultimate
liability regardless of the outcome, and through counsel of its choice (which
counsel shall be reasonably satisfactory to the Indemnified Party), to litigate,
defend, settle or otherwise attempt to resolve such Third Party Claim; provided,
however, that if in the Indemnified Party's reasonable judgment a conflict of
interest may exist between the Indemnified Party and the Indemnifying Party with
respect to such Third Party Claim, then the Indemnified Party shall be entitled
to select counsel of its own choosing, reasonably satisfactory to the
Indemnifying Party, in which event the Indemnifying Party shall be obligated to
pay the fees and expenses of such counsel. Notwithstanding the preceding
sentence, the Indemnified Party may elect, at any time and at the Indemnified
Party's sole cost, expense and ultimate liability, regardless of the outcome,
and through counsel of its choice, to litigate, defend, settle or otherwise
attempt to resolve such Third Party Claim. If the Indemnified Party so elects
(for reasons other than the Indemnifying Party's failure or refusal to provide a
defense to such Third Party Claim), then the Indemnifying Party shall have no
obligation to indemnify the Indemnified Party with respect to such Third Party
Claim, but such disposition will be without prejudice to any other right the
Indemnified Party may have to indemnification under Sections 5.1 or 5.2 hereof,
regardless of the outcome of such Third Party Claim. If the Indemnifying Party
fails or refuses to provide a defense to any Third Party Claim in a timely
manner (including, without limitation, if the Indemnifying Party fails to
respond to all complaints served in connection with any such Third Party Claim
prior to the entry of a default judgment against the Indemnified Party), then
the Indemnified Party shall have the right to undertake the defense, compromise
or settlement of such Third Party Claim, through counsel of its choice, on
behalf of and for the account and at the risk of the Indemnifying Party, and the
Indemnifying Party shall be obligated to pay the costs, expenses and attorney's
fees incurred by the Indemnified Party in connection with such Third Party
Claim. In any event, Buyer and Sellers shall fully cooperate with each other and
their respective counsel in connection with any such litigation, defense,
settlement or other attempted resolution. Prior to the Closing, Sellers shall
cause the Company to fully cooperate with Buyer and its counsel in connection
therewith, and after the Closing Buyer shall cause the Company to fully
cooperate with Sellers and their counsel in connection therewith.
5.4. Indemnification by Sellers. The Sellers shall indemnify Buyer and
Company against any claim for any fees or commissions by any broker, finder or
other person for services or alleged services rendered to the Sellers in
connection herewith or the transaction contemplated hereby, including, without
limitation, Claims by Escrow Agent.
5.5. Approval/Disapproval Notice. Buyers shall deliver written notice
to Sellers within five (3) business days of receipt of the approvals described
in Sections 6.1.3 and 6.1.4 (Approval Notice). If Buyer concludes, in its
reasonable discretion, that it will be unable to
10
<PAGE> 11
obtain said approvals, it may send written notice of such conclusion to Sellers
(Disapproval Notice) at any time.
5.6. Escrow Fees. Buyer and Sellers shall each pay amounts payable to
Escrow Agent under the terms of the Escrow Agreement.
6. Conditions of Closing.
6.1. Buyer's Conditions of Closing. The obligation of Buyer to purchase
and pay for the Shares shall be subject to and conditioned upon the satisfaction
at the Closing of each of the following conditions:
6.1.1. All representations and warranties of Sellers contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing Date and Sellers shall have materially performed all agreements and
covenants and satisfied all material conditions on their part to be performed or
satisfied by the Closing Date pursuant to the terms of this Agreement and the
Escrow Agreement, and Buyer shall have received a certificate of Sellers dated
the Closing Date to such effect.
6.1.2. As of the Closing, there shall be no effective injunction,
writ, preliminary restraining order or any order of any nature issued by a court
of competent jurisdiction directing that the transactions provided for herein or
any of them not be consummated as so provided or imposing any conditions on the
consummation of the transactions contemplated hereby, which is unduly burdensome
on Buyer in Buyer's reasonable judgment.
6.1.3. Prior to the Closing, Buyer shall have received approval
of the Wells Fargo Bank of Buyer's purchase of the Shares, without acceleration
of the Wells Fargo Banks' loans and the Wells Fargo Bank loan shall have been
rescheduled or refinanced with Wells Fargo Bank or another lender.
6.1.4. Prior to the Closing, Buyer shall have received approval
of Buyer's purchase of the Shares from the Nevada Gaming Commission and the
approval of any other casino regulatory authority, agency, or board with
jurisdiction over the purchase and sale transaction contemplated under this
Agreement, which such approval may include, without limitation, the licensing
of, or finding of suitability of, Buyer and/or any person affiliated with Buyer
if required under any applicable laws or regulations.
6.1.5. Prior to Closing, Buyer shall deposit in Escrow the sum of
Five Million Dollars ($5,000,000.00) representing the balance of the Purchase
Price.
6.2. Sellers Conditions of Closing. The obligation of Sellers to sell
the Shares shall be subject to and conditioned upon the satisfaction at the
Closing of each of the following conditions:
6.2.1. All representations and warranties of Buyer contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing Date and Buyer shall have materially performed all agreements and
covenants and satisfied all material conditions on
11
<PAGE> 12
its part to be performed or satisfied by the Closing Date pursuant to the terms
of this Agreement, and Sellers shall have received a certificate of Buyer dated
the Closing Date to such effect.
6.2.2. Buyer shall have paid the Purchase Price (less the
Deposit) which shall be disbursed to Sellers in accordance with the Escrow
Agreement.
6.2.3. Buyer shall have executed and delivered the Escrow
Agreement to Sellers and the Escrow Agent.
6.2.4. Buyer shall have paid the Deposit to the Escrow Agent.
6.2.5. Buyer shall have delivered to Sellers a Certificate of its
Manager(s) certifying:
6.2.5.1. Resolutions of its Members and Managers
authorizing execution of this Agreement and the execution, performance and
delivery of all agreements, documents and transactions contemplated hereby; and
6.2.5.2. The incumbency of its Manager and/or Members
executing this Agreement and all agreements and documents contemplated hereby.
6.2.6. The approval and all consents from third parties and
governmental agencies required to be obtained by Buyer in order to consummate
the purchase and sale of the Shares as contemplated in this Agreement shall have
been obtained.
6.2.7. As of the Closing, there shall be no effective injunction,
writ, preliminary restraining order or any order of any nature issued by a court
of competent jurisdiction directing that the transactions provided for herein or
any of them not be consummated as so provided or imposing any conditions on the
consummation of the transactions contemplated hereby, which is unduly burdensome
on Sellers.
7. Default.
7.1. Definition of Default. The term "Default" as used in this
Agreement with respect to either party shall mean a material misrepresentation,
material omission, or material breach of warranty given by said party, or a
failure to fully and timely perform any covenant or obligation required to be
performed by said party. If either party is in Default under this Agreement, the
same shall be deemed to be a Default under the Escrow Agreement. If either party
is in Default under the Escrow Agreement, the same shall be deemed to be a
Default under this Agreement. If either party alleges the other party to be in
Default under this Agreement or the Escrow Agreement, such party shall promptly
give the other party written notice of such alleged Default and the other party
shall not be deemed to be in Default hereunder if, after a reasonable period of
time following such notice (not to exceed ten (10) days), the other party cures
such alleged Default or, if such alleged Default cannot be cured within said ten
(10) day period, commences to cure such alleged Default within ten (10) days
following such notice and diligently thereafter prosecutes such cure to
completion. However, notwithstanding anything contained in this Section 7.1 to
the contrary, time is of the essence with respect to all time periods and dates
set
12
<PAGE> 13
forth in this Agreement, and neither party has any right to extend any such time
period or date in order to cure any alleged Default by such party.
7.2. Limitation on Liability. Notwithstanding any provision in this
Agreement to the contrary with respect to the covenants, obligations,
liabilities, or indemnities of Sellers, in the event of any Default by Sellers,
each of the parties constituting Sellers shall only be liable and responsible
for a proportionate amount of the total liability of Sellers and/or damages
payable to Buyer as a result of, in connection with, or arising out of such
Default (which total liabilities and/or damages are referred to herein as the
"Buyer Damages"). The proportionate amount of the Buyer Damages that each such
party constituting Sellers is liable and responsible for shall be equal to the
total Buyer Damages multiplied by a fraction the numerator of which is the total
number of shares owned by each such person (whether in his/her individual
capacity or as a Trustee) and the denominator of which is the total number of
shares.
8. Miscellaneous.
8.1. Confidentiality. Buyer and Sellers each understand and agree that
in the course of negotiating and performing the required due diligence each
party may make available to the other information which is confidential or
proprietary to the party providing such information. Each party agrees to keep
such material confidential and not to disclose such material to any third party,
except for the agents, accountants, attorneys, consultants, or employees of such
party and as may be required to comply with securities, gaming, or other legal
requirements or to assist said party in its analysis of such information. If the
purchase and sale of the Shares as contemplated in this Agreement is not
consummated for any reason, each party shall return to the other party all
copies of documents, information, and other materials provided by the other
party to said party.
8.2. Notice. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered, mailed by
certified or registered mail, return receipt requested, delivered by reputable
overnight delivery service, such as Federal Express, or sent by facsimile
transmission, addressed as follows:
If to Buyer:
Sapphire Gaming, LLC
c/o The Hertz Investment Group
617 South Olive Street, Suite 1210
Los Angeles, CA 90014
Fax: (213) 533-1019
13
<PAGE> 14
Required Copy to:
Law Offices of John D. Forbess, PC
9595 Wilshire Blvd., Suite 502
Beverly Hills, CA 90212-2505
Attn: John D. Forbess, Esq.
Fax: (310) 281-8001
If to Sellers:
Pete Cladianos, Jr.,
Individually and as Trustee
345 North Arlington Ave.
Reno, NV 89501
Katherene Johnson Latham,
Individually and as Trustee
125 Circle Dr.
Reno, Nevada 89509
Deborah Lundgren,
Individually and as Trustee
3530 Brighton Way
Reno, Nevada 89509
Required Copy to:
Richard M. Trachok II
Bible Hoy & Trachok
201 West Liberty, Third Floor
Reno, NV 89501
Fax: (775) 786-7426
If to Escrow Agent:
Western Title Company
Attn: Don Allen
(or to such other address as any party shall specify by written notice so
given), and shall be deemed to have been delivered as of the date so personally
delivered or actually delivered by overnight delivery service, forty-eight hours
after the date mailed, or upon telephone confirmation by either party of receipt
of any facsimile transmission.
14
<PAGE> 15
8.3. Execution of Additional Documents. The parties hereto will at any
time, and from time to time after the Closing Date, upon request of the other
party, execute, acknowledge and deliver all such further acts, deeds,
assignments, transfers, conveyances, powers of attorney and assurances as may be
required to carry out the intent of this Agreement, and to transfer and vest
title to any Shares being transferred hereunder, and to protect the right, title
and interest in and enjoyment of all of the Shares sold, granted, assigned,
transferred, delivered and conveyed pursuant to this Agreement; provided,
however, that this Agreement shall be effective regardless of whether any such
additional documents are executed and/or delivered. Each party hereto will at
all times, and from time to time, whether before or after the Closing Date, upon
request of the other party, do such further acts and execute, acknowledge and
deliver such farther documents or instruments as may be reasonably requested by
the other party in order to fully effectuate the intent of the parties and the
consummation of the transactions contemplated in this Agreement; provided,
however, that this Agreement shall be effective regardless of whether any such
acts are done or additional documents are executed and/or delivered.
8.4. Binding Effect; Benefits. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
successors, executors, administrators and assigns. Notwithstanding anything in
this Agreement to the contrary, nothing in this Agreement, expressed or implied,
is intended to confer on any person (including, without limitation, Escrow
Agent) other than the parties hereto or their respective heirs, successors,
executors, administrators and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
8.5. Entire Agreement. This Agreement, together with the Exhibits,
Schedules and other documents contemplated hereby, constitutes the final written
expression of all of the agreements between the parties, and is a complete and
exclusive statement of those terms. It supersedes all understandings, agreements
in principle and negotiations concerning the matters specified herein including,
without limitation, the Agreement in Principle. Any representations, promises,
warranties or statements made by either party that differ in any way from the
terms of this written Agreement and the Schedules and other documents
contemplated hereby, shall be given no force or effect. The parties specifically
represent, each to the other, that there are no additional or supplemental
agreements between them related in any way to the matters herein contained
unless specifically included or referred to herein. No addition to or
modification of any provision of this Agreement shall be binding upon any party
unless made in writing and signed by all parties.
8.6. Law; Venue. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada exclusive of the conflict of law
provisions thereof. The exclusive venue of any action or lawsuit related to this
Agreement or arising out of or in connection with this Agreement shall be Washoe
County, Nevada, and each party hereby consents to the personal jurisdiction of
any court of competent subject matter jurisdiction sitting in said County and to
the service of process in accordance with the laws of the State of Nevada and
the local rules of any such court.
8.7. Survival. All of the terms, conditions, warranties and
representations contained in this Agreement shall survive, in accordance with
their terms, delivery by Buyer of the
15
<PAGE> 16
consideration to be given by it hereunder and delivery by Sellers of the
consideration to be given by them hereunder, and shall survive the execution
hereof and the Closing hereunder.
8.8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument. Any original executed counterpart of
this Agreement may be delivered by the executing party to the other party by
facsimile transmission. Any such counterpart of this Agreement delivered by
facsimile shall not be deemed to be received unless receipt of such facsimile
transmission is verbally confirmed to the executing party by the receiving
party, by telephone. The executing party shall also mail a "hard copy" of such
counterpart to the receiving party by United States Mail before the end of the
next business day following the date of transmission by facsimile. However, the
receiving party's failure to receive said hard copy shall not affect the
validity of any original executed counterpart of this Agreement transmitted by
facsimile and confirmed by telephone in accordance with this Section 8.8.
8.9. Headings. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
8.10. Waivers. Either Buyer or Sellers may, by written notice to the
other, (i) extend the time for the performance of any of the obligations or
other actions of the other under this Agreement; (ii) waive any inaccuracies in
the representations or warranties of the other party contained in this Agreement
or in any document delivered pursuant to this Agreement; (iii) waive compliance
with any of the conditions or covenants of the other party contained in this
Agreement, or (iv) waive performance of any of the obligations of the other
party under this Agreement. Except as provided in the preceding sentence, no
action taken pursuant to this Agreement, including without limitation any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any other
provision hereunder.
8.11. Merger of Documents; Conflict. This Agreement and all agreements
and documents contemplated hereby constitute one agreement and are
interdependent upon each other in all respects. In the event of any conflict
between the terms and conditions of this Agreement and the Escrow Agreement, the
terms and conditions of this Agreement shall control.
8.12. Incorporation of Schedules. The following Exhibits and Schedules
attached hereto are by this reference incorporated herein and made a part hereof
for all purposes as if fully set forth herein.
Exhibit A List of Shareholders
Schedule 1.6 Escrow Agreement
Schedule 2.9 Threatened Litigation
16
<PAGE> 17
8.13. Severability. If for any reason whatsoever, any one or more of
the provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid as applied to any particular case or in all cases, such
circumstances shall not have the effect of rendering such provision invalid in
any other case or of rendering any of the other provisions of this Agreement
inoperative, unenforceable or invalid.
8.14. Assignability. Buyer shall have the right to assign its interest
and rights, and to delegate its duties under this Agreement at any time prior to
Closing to any third party, subject to Sellers' prior written consent. Sellers
shall not unreasonably withhold or delay such consent and shall evidence such
consent by prompt written acknowledgment of any assignment agreement presented
by Buyer to Sellers, fully executed by Buyer, as assignor, and its assignee.
8.15. Drafting. The parties acknowledge and confirm that each of their
respective attorneys have participated jointly in the review and revision of
this Agreement and that it has not been written solely by counsel for one party.
8.16. Vice Chairman Position. It is agreed that upon the Closing the
Buyer shall vote its shares in favor of retaining Pete Cladianos, Jr. in the
position of Vice Chairman of the corporate entity for a period of five (5) years
thereafter on the dame terms as are in effect immediately prior to the date of
this Agreement. In addition, for so long as Buyer shall own a controlling
interest in the Company Pete Cladianos, Jr. shall be entitled to retain his
present office rent free, a secretary and secretarial office at no cost.
8.17. Press Releases. All notices to third parties and all other
publicity concerning the transactions contemplated by this Agreement shall be
jointly planned and coordinated by and between Buyer and Sellers. No party shall
act unilaterally in this regard without the prior written approval of the other
party; provided, however, that the approval of either party shall not be
unreasonably withheld.
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year hereinabove
first set forth.
- -------------------------------------
KATHERENE JOHNSON LATHAM, Trustee of the Katherene J. Latham 1988 Trust (Living
Trust)
- -------------------------------------
DEBORAH R. LUNDGREN, Trustee of the Deborah R. Lundgren 1986 Trust (Living
Trust)
- -------------------------------------
DEBORAH R. LUNDGREN, Trustee of the Gregory Kent Lundgren Trust
- -------------------------------------
DEBORAH R. LUNDGREN, Trustee of the Pete Cladianos, Jr. Trust FBO Gregory K.
Lundgren
17
<PAGE> 18
- -------------------------------------
DEBORAH R. LUNDGREN, Trustee of the Katherene R. Lundgren Trust FBO Gregory K.
Lundgren
- -------------------------------------
DEBORAH R. LUNDGREN, Trustee of the Katherene R. Lundgren Trust
- -------------------------------------
DEBORAH R. LUNDGREN, Trustee of the Pete Cladianos, Jr. Trust FBO Katherene R.
Lundgren
- -------------------------------------
DEBORAH R. LUNDGREN, Trustee of the Katherene Johnson Latham Trust FBO Katherene
R. Lundgren
- -------------------------------------
DEBORAH R. LUNDGREN, Custodian of Katherene R. Lundgren under Nevada Uniform
Transfers to Minors Act
- -------------------------------------
PETE CLADIANOS, JR., Trustee of the Pete Cladianos, Jr. Trust FBO Allison
Cladianos
- -------------------------------------
PETE CLADIANOS, JR., Trustee of Antonia Cladianos II Grrantor Retained Annuity
Trust
- -------------------------------------
PETE CLADIANOS, JR., Trustee of the Pete Cladianos, Jr. Trust FBO Antonia
Cladianos II
- -------------------------------------
PETE CLADIANOS, JR., Trustee of the Katherene Johnson Latham Trust FBO Antonia
Cladianos II
- -------------------------------------
PETE CLADIANOS, JR., Trustee of the Second Amended Antonia
Cladianos II Trust
- -------------------------------------
PETE CLADIANOS, JR., Trustee of the Pete Cladianos III Grantor Retained Annuity
Trust
- -------------------------------------
PETE CLADIANOS, JR., Trustee of the Pete Cladianos, Jr. Trust FBO Pete Cladianos
III
- -------------------------------------
PETE CLADIANOS, JR., Trustee of the Katherene Johnson Latham Trust FBO Pete
Cladianos III
- -------------------------------------
PETE CLADIANOS, JR., Trustee of the Second Amended Pete Cladianos
III Trust
- -------------------------------------
PETE CLADIANOS, JR., Trustee of the Leslie Cladianos Grantor Retained Annuity
Trust
- -------------------------------------
PETE CLADIANOS, JR., Trustee of the Pete Cladianos, Jr. Trust FBO Leslie
Cladianos
- -------------------------------------
PETE CLADIANOS, JR., Trustee of the Katherene Johnson Latham Trust FBO
Leslie Cladianos
18
<PAGE> 19
- -------------------------------------
PETE CLADIANOS, JR., Trustee of the Hannah Patricia Pauly Trust FBO Hannah
Patricia Pauly,
- -------------------------------------
PETE CLADIANOS III, Trustee of the Bradley Cladianos 1996 Trust
FBO Bradley Cladianos, Pete Cladianos, Jr., Grantor
BUYER:
SAPPHIRE GAMING, LLC,
A California Limited Liability Company
By:
----------------------------------
Its:
---------------------------------
<PAGE> 20
EXHIBIT "A"
<TABLE>
<CAPTION>
Number of
Shareholder Date of Trust Shares
----------- ------------- ---------
<S> <C> <C> <C>
Pete Cladianos, Jr. Trust FBO Allison Cladianos, 12/09/91 23,565
Pete Cladianos, Jr., Trustee
Antonia Cladianos II Grantor Retained Annuity Trust, 08/13/93 100,000
Pete Cladianos, Jr. , Trustee
Pete Cladianos, Jr. Trust FBO Antonia Cladianos II, 12/22/86 34,285
Pete Cladianos, Jr., Trustee
Katherene Johnson Latham Trust FBO Antonia Cladianos II, 12/22/86 27,839
Pete Cladianos, Jr., Trustee
Second Amended Antonia Cladianos II Trust, 02/22/87 213,376
Pete Cladianos, Jr., Trustee
Pete Cladianos III Grantor Retained Annuity Trust, 08/13/93 100,000
Pete Cladianos, Jr., Trustee
Pete Cladianos, Jr. Trust FBO Pete Cladianos III, 12/22/86 34,285
Pete Cladianos, Jr., Trustee
Katherene Johnson Latham Trust FBO Pete Cladianos III, 12/22/86 27,839
Pete Cladianos, Jr., Trustee
Second Amended Pete Cladianos III Trust, 02/19/87 224,162
Pete Cladianos, Jr., Trustee
Leslie Cladianos Grantor Retained Annuity Trust, 08/13/93 200,000
Pete Cladianos, Jr., Trustee
Pete Cladianos, Jr. Trust FBO Leslie Cladianos, 11/26/91 34,375
Pete Cladianos, Jr., Trustee
Katherene Johnson Latham Trust FBO Leslie Cladianos, 12/08/92 20,221
Pete Cladianos, Jr., Trustee
Hannah Patricia Pauly Trust FBO Hannah Patricia Pauly, 11/18/98 18,228
Pete Cladianos, Jr., Trustee
Bradley Cladianos 1996 Trust FBO Bradley Cladianos, 05/01/96 16,909
Pete Cladianos, Jr., Grantor, Pete Cladianos III, Trustee
Katherene J. Latham 1988 Trust (Living Trust), 08/08/88 306,258
Katherene J. Latham, Trustee
Deborah R. Lundgren 1986 Trust (Living Trust), 09/03/86 580,298
Deborah R. Lundgren, Trustee
Gregory Kent Lundgren Trust Deborah R. Lundgren, Trustee 03/29/93 28,175
Pete Cladianos, Jr. Trust FBO Gregory K. Lundgren, 12/01/88 27,931
Deborah R. Lundgren, Trustee
Katherene Johnson Latham Trust FBO Gregory K. Lundgren, 12/01/88 6,083
Deborah R. Lundgren, Trustee
Katherene R. Lundgren Trust, Deborah R. Lundgren, Trustee 03/29/93 28,175
Pete Cladianos, Jr., Trustee FBO Katherene R. Lundgren, 12/22/86 27,931
Deborah R. Lundgren, Trustee
Katherene Johnson Latham Trust FBO Katherene R. Lundgren, 12/22/86 6,083
Deborah R. Lundgren, Trustee ---------
2,086,018
=========
</TABLE>
